Dow Inches Up 0.36 to 2,239.11, a Fraction Shy of Its Pre-Crash Level
Profit taking and a weaker dollar took the bloom off a brief blue chip rally Thursday, holding Wall Street to a marginally higher close just short of its immediate pre-crash level.
The Dow Jones average of 30 industrial issues rose 0.36 to 2,239.11 after picking up 24.11 on Wednesday.
The widely followed barometer had a session high of 2,254.64 Thursday--the first time it has surpassed the level where it stood before the October, 1987, crash.
On Oct. 16, 1987, the last trading day before the crash, the average closed at 2,246.74.
Advancing issues outnumbered decliners by a margin of about 5 to 4 in New York Stock Exchange trading.
Volume on the floor of the Big Board came to 192.03 million shares, up from 187.54 million in the previous session, and the highest NYSE volume so far this year.
Analysts said there were still signs of strength on Wall Street, and they expected the market’s 1989 rally to continue.
“I think it’s entitled to at least a day or two of flatness,” said Michael Metz, an analyst with Oppenheimer & Co. He pointed to the advance-decline ratio as a indication of the market’s underlying health.
The Labor Department reported Thursday that its consumer price index rose 0.3% in December, bringing the increase in the index for all of 1988 to 4.4%.
The latest inflation report was lower than most economists had predicted and contributed to the positive atmosphere on Wall Street.
However, brokers say the market’s strength has not seemed to derive from economic news, but rather from a gradual easing of the fears that have persisted that the Federal Reserve will move interest rates higher.
The federal funds rate, the interest on overnight loans between banks, was quoted at 9%, up from 8.938% late Wednesday.
In foreign trading, stock prices closed lower in Tokyo, giving back a portion of the previous day’s advance to record highs. The Nikkei 225-share index fell 43.15 points to 31,311.40.
In London, a brisk rally faltered as Wall Street turned mixed and investors paused to assess the outlook, dealers reported. The Financial Times 100-share index closed up 18.7 points to a new post-crash high of 1,910.8.
Central banks slammed the dollar lower Thursday, cooling a rally that had brought the U.S. currency to its highest levels since early October.
Foreign exchange dealers said one round of dollar selling by nine central banks was unsuccessful, but a second round drove the dollar lower against most currencies.
Dollar sales were accompanied by West Germany’s central bank raising two key interest rates, a step intended to make yields on German securities more attractive and keep investors from switching from marks to dollars.
The dollar had gotten as high as 129.8 Japanese yen and 1.88 marks before the successful attack by the central banks at mid-morning in New York.
On Wednesday, the dollar had risen strongly despite two negative reports: a bigger-than-expected U.S. trade deficit and a record Japanese trade surplus.
The dollar was due for a pullback, at least a temporary one, said Frank Conte, vice president for foreign exchange at Barclays Bank in New York.
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